Vodafone tax avoidance highlights need for reform

A new tax scandal has hit headlines, as telecoms company Vodafone has managed to avoid paying corporate tax for the second year running. The Berkshire-based phone giant is defending its actions by claiming investment in the UK network and interest payments have exceeded its corporation tax liabilities.

In addition, the company has publicly announced its commitment to “integrity in all tax matters”, highlighting payments of £882 million in non-corporate taxes and contributions.

Vodafone chief executive Vittorio Colao said: "We believe the UK tax debate should be wider than just merely looking at corporation tax, because different industries make their - in our case significant - contributions in a variety of ways."

Mr Vittorio was referring to the £802 million it paid the government for its 4G spectrum mobile internet, in addition to the £900 million it will spend to get the UK network up and running ahead of the launch.

Last year, Vodafone’s revenues in Britain exceeded £5 billion, however that’s only a fraction of the amount made abroad. The company said the UK contributed to just 2.5 per cent of last year’s profits. Their tax payments abroad reflect this - internationally, Vodafone paid £3 billion in taxes for the 2012 to 2013 fiscal year.

Vodafone’s lack of UK corporate tax payment adds fuel to the fire sparked by Google, Starbucks and Amazon, all of whom have been accused of failing pay their fair share.

To ensure your business doesn’t get caught up in a similar scandal, make sure your business is tax compliant. Because tax codes can be complicated, consult chartered certified accountants to stay on top of your finances. Maintaining a good reputation will require you to pay your fair share. Meanwhile, maintaining a healthy income will require you to pay no more than is needed.

Vodafone added: "Individuals and companies have legal obligations to pay tax; but those obligations do not extend to paying more than the amount legally required."